04/03/2013 // Keller Grover LLP // Carey Been // (press release)
A new ruling by the California Court of Appeal made headway in making arbitrations more consumer-friendly by ruling that a 2011 decision by the U.S. Supreme Court enforcing arbitrations agreements that ban class-wide arbitration, does not extend to cases where the arbitration clause is so one-sided it’s unconscionable, says Los Angeles consumer protection attorney Carey Been.
The court ruled 2-1 to reinstate a putative class action filed by Leasa Compton, a former property manager of American Management Services, LLC. The court also tossed out Los Angeles Superior Court Judge Michael Johnson’s ruling that Ms. Compton must individually arbitrate her wage claims against AMS.
Compton, who was employed by AMS from 2006 to 2009, filed the employment lawsuit in 2010, alleging that AMS failed to pay minimum and overtime wages, failed to provide rest and meal breaks, and failed to properly reimburse expenses, the Metropolitan News-Enterprise reported.
During the discovery process in April 2011, the U.S. Supreme Court made a landmark decision in AT&T Mobility, LLC v. Concepcion, which determined that the Federal Arbitration Act pre-empts California’s public policy against enforcement of contract clauses that ban class actions.
This prompted AMS to compel arbitration in their dispute with Compton and cited an arbitration clause in her 2006 employment agreement. Judge Johnson sided with AMS and ruled that the motion was timely because it was filed right after the Concepcion ruling, which meant the clause was enforceable under the Concepcion decision.
The arbitration agreement required that “all disputes between the parties, excluding those involving unfair competition or trade secrets, be submitted to binding arbitration, except that the employer was allowed to sue for ‘injunctive and/or equitable relief for unfair competition and/or the use and/or unauthorized disclosure of trade secrets or confidential information.’ It also barred joint or class wide arbitration proceedings absent the consent of all parties, and required that arbitration be initiated within one year of the accrual of a claim,” Been, a Los Angeles consumer protection attorney revealed.
Justice Laurence Rubin of the Court of Appeal found that “an arbitration agreement that one-sidedly favors an employer—such as by forcing employees to arbitrate while allowing the employer to litigate disputes with employees—may be declared unconscionable and unenforceable by a court.”
Justice Rubin found that the AMS clause signed by Compton was unconscionably one-sided because it required the employee to arbitrate every conceivable claim that an employee might raise, while allowing the employer to sue under some circumstances.
In addition, the appeals court determined found unconscionable “provisions that require that arbitration be demanded within a year of a claim’s accrual, whereas the various types of claims likely to be raised by an employee are generally subject to two-, three-, or four-year statutes of limitations, and the types of claims that the employer has reserved the right to litigate are subject to three- or four-year statutes.”
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